Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Statistics and Probability Expert

describe what would be the utility values for the amounts given based on the indifference probabilities?

Chez Paul is contemplating moreover opening another restaurant or expanding its existing location.  The payoff table for these two decisions is

 

s1

s2

s3

New Restaurant

-$80K

$20K

$160K

Expand

-$40K

$20K

$100K

Paul has computed the indifference probability for the lottery having a payoff of $160K with probability p and -$80K with probability (1-p) as follows-

 Amount 

Indifference Probability (p)

 -$40K

0.4

  $20K

0.7

$100K  

0.9

a. Is Paul a risk avoider and a risk taker or risk neutral? describe.

b. Presume Paul has defined the utility of -$80K to be 0 and the utility of $160K to be 80.  describe what would be the utility values for  -$40K, $20K, and $100K based on the indifference probabilities?

c. Supposing P(s1) = .4, P(s2) = .3, and P(s3) = .3.  Which decision must Paul make using the expected utility approach? 

d. Relate the result in part c with the decision using the expected value approach.

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M922123

Have any Question? 


Related Questions in Statistics and Probability

A laboratory in california is interested in finding the

A laboratory in California is interested in finding the mean chloride level for a healthy resident in the state. A random sample of 50 healthy residents has a mean chloride level of 100 mEq/L. If it is known that the chl ...

A researcher studying correctional treatment on 192 sex

A researcher studying correctional treatment on 192 sex offenders composed of 10 females and 182 males finds that 11 males along with 1 female had reoffended. He then calculates the percentages and finds that 10% of fema ...

1 why must a different t-test be used for matched-subjects

1. Why must a different t-test be used for matched-subjects and within-subjects designs than for randomized groups designs? 2. What was W. S. Gosset's contribution to behavioral research?

Assume the sweatshirt test scores are normally distributed

Assume the sweatshirt test scores are normally distributed with a mean of 500 and a standard deviation of 100. (a) Consider all random samples of 100 test scores. What is the standard deviation of the sample means? (b) W ...

The state police are trying to crack down on speeding on a

The State Police are trying to crack down on speeding on a particular portion of the Massachusetts Turnpike. To aid in this pursuit, they have purchased a new radar gun that promises greater consistency and reliability. ...

Case study mikhail gorbachevs 1988 un speechif the pace of

Case Study: Mikhail Gorbachev's 1988 UN SpeechIf the pace of improving US-Soviet relations seemed rapid, Mikhail Gorbachev's speech to the United Nations General Assembly would shift the process into overdrive.  In this ...

Describe the technologies that contributed to the

Describe the technologies that contributed to the development and advancement of the newspaper from small, infrequent circulations of a few brief pages to the mass production of daily, extensive pages of news.

Data show that narcissistic people who have a grandiose

Data show that narcissistic people (who have a grandiose, inflated perception of themselves) often fly into a "narcissistic rage" when things don't go their way. (In other words, they throw a temper tantrum.) A resea ...

A repeated-measures experiment comparing only two

A repeated-measures experiment comparing only two treatments can be evaluated with either a t statistic or an ANOVA. As we found with the independent-measures design, the t test and the ANOVA produce equivalent conclusio ...

The number of credits being taken by a sample of 13

The number of credits being taken by a sample of 13 full-time college students are listed below. Find the mean, median, and mode of the data, if possible. If any measure cannot be found or does not represent the center o ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro